MOTOROLA GETS WIRED ON CABLE;SUBURBAN PLANT TO MAKE MULTIMEDIA GEAR

Motorola Inc. is set to open a factory in Lake Zurich to propel itself into the burgeoning market to transform cable networks into two-way communication systems.

Blue-sky estimates suggest the market eventually could rival Motorola's cellular telephone business, which contributes about 30% of the Schaumburg-based giant's $22 billion in revenues.

Motorola is refurbishing a 117,000-square-foot former computer factory to employ 200 manufacturing and assembly workers by yearend, with plans for 300 employees by the end of 1996.

The leased factory, scheduled to open next week, will produce two devices that Motorola considers potential blockbusters. But neither contributes much to the company's sales yet.

One is the company's newest offering: technology that can turn cable TV systems into telephone networks.

Motorola's CableComm boxes-devices that look like paper towel dispensers, but with wires coming out of the bottom-enable consumers to make telephone calls, order videos and play computer games with friends in other states, among other things-on a single system. The boxes are installed on customers' houses.

The other product group produces Motorola's Envoy and Marco hand-held computers, which send data over wireless networks.

The four-year lease on the Lake Zurich factory is modest compared with Motorola's other recent expansion efforts, such as its $100-million cellular phone plant under construction in far northwest suburban Harvard, which will employ 3,000 people when it opens next year.

But the opportunities to sell products enabling cable operators to chip away at the $90-billion local phone market are huge. Lisle-based Tellabs Inc. also is preparing to enter this market, called cable telephony.

"This could become as significant a product (for Motorola) as wireless telephony," says Philip Sirlin, a telecommunications analyst with investment firm Schroder Wertheim & Co. in New York.

In September, Motorola announced its first CableComm contract, a deal valued at about $110 million, to sell 220,000 units to cable industry heavyweight Tele-Communications Inc. (TCI). Motorola and Colorado-based TCI are beginning a field trial in Arlington Heights to test their system.

The company says it's in talks with other cable operators, and a top executive also hints that deals are in the works with regional Bell telephone companies like Ameritech Corp.

"We want to be the munitions dealer," says James M. Phillips, corporate vice-president and general manager of Motorola's multimedia group. "We'll sell to both of them."

Cable systems originally were set up for one-way video transmissions. But with upgrades over the past few years, technology like Motorola's gives the systems two-way capabilities that link televisions, telephones and personal computers. The result is a system-already in place and accessible to 95% of the country's homes-that can transmit voice, data and video signals.

Applications range from the mundane (but lucrative) telephone business to videoconferencing and long-distance video games.

"It's a product for which the market is about to begin," says Geoffrey S. Roman, senior vice-president for strategic planning at Chicago-based General Instrument Corp., also a maker of cable television equipment.

Motorola's entry into cable telephony has come relatively cheaply because the company is exploiting its radio-technology expertise.

Having the only announced contract gives Motorola an early lead, but competitors, including Tellabs, New Jersey-based AT&T Corp., Northern Telecom Ltd. of Canada and Minnesota-based ADC Telecommunications Inc., aren't far behind.

"We see a substantial market evolving both here in the United States and outside," says Wayne Partington, group manager for Tellabs' Cablespan technology.

In addition to ongoing trials with Time Warner Inc. in Rochester, N.Y., and Viacom Inc. in Castro Valley, Calif., Mr. Partington says Tellabs is negotiating to supply systems in Chile, the Philippines, China, Malaysia and Australia.

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